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Guaranteed Incomes vs. Job Sharing Schemes

Job Sharing or Guaranteed Basic Income?

Poverty reduction programmes can appear in several different forms. Today we discuss the differences between Job Sharing and Guaranteed Basic Income.

PART I – Guaranteed Basic Income

The Guaranteed Basic Income (GBI) or Unconditional Basic Income (UBI) schemes that have been proposed in recent years that are designed to mitigate poverty — poverty that is mostly caused by higher unemployment due to economic downturn or from humans being replaced by robotics, or a combination of both — have been contrived as if they were made to fail the smell test for voters asked to vote on such initiatives.

For instance, the recent Swiss referendum asked Swiss citizens to vote on a Unconditional Basic Income equivalent to $30,300/yr for every citizen, working or not. How ludicrous! (Even I, a UBI supporter would’ve voted against that!)

Of course, all that extra income would be taxable and it would boost an individual’s income into a much higher tax bracket, and consequently, all Swiss taxpayers would pay more tax. However, in addition to automatically being bumped into a higher taxation bracket, the Swiss were looking at major percentage increases to their tax rate in order to afford that exorbitant UBI programme.

However, if such guaranteed income schemes are kept within a reasonable context it suddenly becomes much easier to afford.

Using Canada as an example; Working people who earn any amount over the official poverty line in Canada (approx. $19,000/yr, depending if you live in a rural area or a city) might not require a Guaranteed Basic Income.

But for those senior citizens and disabled people who live under the poverty line, and for hundreds of thousands of Canadians whose jobs were shipped off to Asia (and we know those jobs are never coming back) whose unemployment insurance benefits have run out and are subsisting on various welfare programmes, all of these people now find themselves living far below the poverty line at $7320 per year in certain provinces.

And we wonder why we have homelessness, substance abuse, high property crime rates and higher policing, court, and incarceration costs.

Using the $19,000/yr poverty line threshold as it relates to guaranteed income schemes, we can see how GBI measures up with the real world. (Note: $19,000/year divided by 12 months = $1533/month)

It’s actually cheaper to pay a person $1533/month, than it is to incarcerate them at $6600/month. (The incarceration costs only average $80,000/yr in Canada — with federal prison inmates costing $113,880/yr. per inmate, and provincial prison inmates costing from $48,000/yr to $58,000/yr per inmate)

It’s also cheaper to pay a person $1533/month, than the common $1,000,000 per person (for example) property damage, policing costs, court costs, and incarceration costs, once all the disparate costs of one repeat offender are totalled up. (Some criminal investigations cost hundreds of thousands of dollars per month and may involve many officers and several government agencies)

It’s cheaper to pay a person $1533/month, than it is to hospitalize them in various Emergency Rooms each time they overdose on street drugs, or get hypothermia from sleeping outdoors.

ER costs are astronomical and range from $260. to $8120. per visit (and costs rise significantly if additional testing is required such as MRI, X-Rays, or if there are complications) and a substance abuser who lives on the street in a violent area might have many Hospital visits per month.

And particularly with vulnerable people like seniors or battered women with young children in tow, who subsist far below the poverty line, it is cheaper to pay a person $1533/month, than picking up the pieces afterward.

By rolling existing social programme spending from many different government departments into a GBI, much of the $1533/month GBI is already funded.

And by dramatically lowering property damage, policing costs, court costs, incarceration costs, and Emergency Room and other healthcare costs, a reasonable GBI can facilitate huge net savings for any jurisdiction.

Guaranteed Basic Income: Dauphin, Manitoba was the site of the Mincome Project in the 1970s. Canada’s policy context concerning basic income may be surprising for some people. The famous Mincome experiment ended abruptly due to a newly-elected government and not due to any failings of the programme; it’s only recently that we’ve learned about the wide extent of its benefits. Photo Dauphin Economic Development on Facebook

PART II

That said; There is nothing that a national (and effective) job sharing scheme can’t fix in regards to high unemployment levels, regardless of how high the unemployment rate soars.

I’m a firm proponent of GBI or UBI and I will strongly support it, in the absence of an effective job sharing programme — which should be our highest priority.

In Sweden, they have mandatory job sharing. Which means that by law, every worker must work for a minimum of 6 months per year.

That’s right, everyone who is not a student, not retired, not on maternity / paternity leave, or not disabled, is classed as a worker and must work a minimum of 6 months per year.

Sometimes, two people share the same job their entire career. Don’t forget that in Sweden, people are mostly employed. It’s the rare person who doesn’t work full time, at least 11 months of the year.

Which means that the unemployment rate among workers would sit at virtually zero percent, EXCEPT for those people who’ve just graduated and are looking for work, or homemakers who’ve just re-entered the job market, or those who’ve relocated with a spouse to a different city in Sweden. (The historical unemployment rate in Sweden is 2.5% which neatly matches-up with my above statement)

In Sweden, there are two unemployment insurance (UI) schemes:

One is the government unemployment insurance plan which pays laid-off workers 66% of their normal salary (most countries have this basic UI setup)

The other is a public / private insurer that workers can voluntarily pay into that allows them to purchase additional unemployment insurance coverage.

Both the government unemployment insurance scheme and the public/private unemployment insurance scheme are money-makers! (And why not?)

For the equivalent of only one or two pennies per dollar earned, workers can purchase the additional unemployment insurance from the public / private insurer — so that during their layoff they receive the normal 66% of their salary from the government unemployment insurance scheme — but also receive up to 33% of their normal salary from their public / private unemployment insurance.

When Swedes get a layoff notice, it’s not a traumatic event in their lives.

From the first day of layoff, they’re on a fully-funded unemployment insurance program that pays them up to 99% of their normal wages, and with no application process nor waiting period. It’s automatic.

It depends upon how much additional coverage they’ve purchased, most people only purchase an additional 24% coverage, giving them 66% + 24% = 90% of their normal salary.

Why don’t they buy 33% coverage?

Because they no longer have commuting expenses, work clothing expenses, and other work-related expenses. It’s actually a net benefit to purchase only 24% coverage. But it’s completely their call to purchase any amount of public / private insurance that they want.

Companies in Sweden like this arrangement as they always have a large pool of fully-trained workers from which to choose.

Also, in the case of an ill or injured worker, Swedish companies simply call-in one of their unemployeds to fill-in for the injured worker — at full pay.

Workers gladly accept this, as not only do they continue to receive their unemployment insurance benefits (both the government UI which is paid monthly and the public/private UI which is paid weekly) but they also get the daily wage from the employer for as many days as they’re required to fill-in for the injured worker.

Yes. As you might expect, there’s a waiting list! The most senior people are at the top of the ‘Do Call’ List, whenever another employee has time away from work for illness.

It’s a great thing for companies, for workers, and for those trying to raise young families in uncertain economic times.

In Sweden, if you’re a worker, you’re covered! No matter what.

Either you’re at work getting 100% of your normal salary — or you’re at home getting (typically) 90% of your salary. There is no ‘other’ category for workers in Sweden.

And throughout your entire career, you will be in one of those two categories.

If you think that workers and their families like that system, you should interview the companies. They like it even more.

Do you think that people should be saved from poverty via (1) a GBI system or (2) do you think that an efficient job sharing programme with both government and public/private unemployment insurance is the answer?